The business of fashion is business

By October 26, 2015September 10th, 2018Business Planning & Strategy

THE BUSINESS OF FASHION

Last week, an interview on ABC News Breakfast with Carla Zampatti caught my eyes and ears. She’s doing the publicity rounds for her autobiography.

Host Virginia Trioli’s first question was about how she explains her enduring success in the notoriously turbulent fashion industry, and Zampatti said straight off the bat: ‘I understood that fashion is a business. You need to make enough profit to buy the next set of fabric to make beautiful clothes’. (I paraphrase, or course. My photographic recall doesn’t work that early in the morning. Or, y’know, at all).

I don’t know anything about Zampatti’s business, but I have worked with a number of Australian fashion designers and companies. And to me, she put her finger on the problem that makes it so hard for fashion businesses to prosper: the need to constantly fund the next production run from the profits of the previous one.

It’s a treadmill. Raise the capital to have the clothes made, sell the clothes to retailers (or direct to the public), recoup your costs, funnel what’s left into the next season. But this isn’t an annual cycle. If a fashion designer’s producing new clothes for three seasons a year, that’s three cycles a year. And those cycles overlap.

What this model means that sustainable, financial growth for a fashion business is extremely hard, and if it happens at all, it’s incremental. If you can retain a small amount of profit out of each of these cycles (after paying overheads, of course), you can, over a number of years, grow a stable business. But if you regularly make a loss on these cycles, your business is inherently unstable.

The most successful fashion designers I’ve worked with understand this cycle. They don’t get too obsessed with ‘creating a label’. Instead they focus on making a product for a distinct market segment, on which they can regularly make a buck. That’s not just the business of fashion, but the bedrock of any successful business.

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